Oil ETFs See Longest Weekly Outflows in 9-Months, Why?

Paigambar Mohan Raj
Source: CGTN

According to Bloomberg, the four most significant oil ETFs (exchange-traded funds) have recorded the longest weekly outflows since July 2022. Investors seem to be pulling their funds out after a recent rally, coupled with uncertain global demands.

The oil ETFs in question are WisdomTree Brent Crude Oil, United States Oil Fund, WisdomTree WTI Crude Oil, and ProShares Ultra Bloomberg Crude Oil. All four funds have posted net outflows for four weeks straight. Last week, the funds witnessed a drawdown of $211 million.

After OPEC+ announced a surprise supply cut, crude futures for the global benchmark Brent and its US equivalent West Texas Intermediate concluded their four weeks of gains. However, some products are showing signs of warning, most notably diesel. Saudi Arabia and other OPEC+ oil producers earlier this month announced additional limits to oil production of about 1.16 million barrels per day. According to Saudi Arabia‘s energy ministry, the voluntary reduction was a move to help the oil market remain stable. Oil prices plummeted toward $70 per barrel last month, the lowest level in 15 months. It infers that a worldwide banking crisis may have affected demand.

What’s pushing funds out of oil ETFs?

According to Soni Kumari, a commodity strategist with ANZ Group Holdings Ltd., “recent outflows are primarily driven by profit-booking.” Kumari says that most of the fresh inflows took place last month when prices fell below $75 a barrel. The strategist added that the funds are seen to be fizzling out, rather than gaining momentum.

Yeap Jun Rong, the market analyst at brokerage IG Asia Pte, mentioned that long-term investors may still expect a decline in oil prices. He said that it is because of “the build-up in recession risks over the past month, which prompted some paring of exposure.”